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Syrians Say They Are Feeling the Grip of Sanctions

The Syrian government says it can weather tough sanctions, but the cost of goods requiring imported items like sugar are rising steadily as sanctions begin to bite.Credit
Neil MacFarquhar/The New York Times

DAMASCUS, Syria — The walls are suddenly closing in around enterprising young Syrians who bought into the idea of a modernized economy promised by President Bashar al-Assad — their simplest money transfers are blocked, and their credit cards are useless outside Syria as the growing list of international sanctions darkens their financial future.

The owner of a handicrafts business who this week tried to transfer $450 to the Lebanese bank account of one of her suppliers found the transaction rejected because it originated in Syria. She had to hand-deliver the cash instead. Then a client, an investor for whom she is designing furniture for a new Abu Dhabi hotel, asked her to export whatever was completed immediately, lest the entire shipment get stuck.

“This is not the solution” to end the crisis in Syria, said the woman, pulling her fashionable black wool coat tighter against the sudden winter chill hitting this superficially calm but beleaguered capital. “This is a way to make us starve to punish the president.”

Nearly nine months after a sustained popular uprising erupted against the Assad government, Syria finds itself increasingly isolated, with even onetime allies condemning its use of lethal force. Turkey, the Arab League, the European Union and the United States have all imposed economic sanctions.

The measures are already biting, in ways evident to a reporter during a brief, rare visit allowed by the government, which was seeking to draw attention to its claim that the Arab League sanctions in particular amounted to an “economic war” against Syria.

The crucial question for Mr. Assad, the international community and the tens of thousands who rose up against the government, is whether such financial pain will induce the leadership to halt the violent suppression of antigovernment protests.

The sanctions are already unraveling the most significant change of Mr. Assad’s tenure: linking Syria to the global economy, allowing private banks and opening economic opportunity for young people in nation where about three-quarters of the population is under the age of 35.

Optimists think the pressure could work, largely because the biggest tycoons are close to the president, especially his cousin, Rami Makhlouf, and some dozen sons of his father’s closest allies. (Mr. Makhlouf gobbled up so many state enterprises put up for sale that Syrians wryly dubbed the privatization process “Ramification.”)

Pessimists worry that the government, including the scions of the old guard, will let the economy sink further to cling to power.

“Up until the last minute, I did not believe the Arab League would take such a decision,” said Mohammed Ghassan al-Qallaa, the president of the Damascus Chamber of Commerce, his office filled with Assad paraphernalia, including a small gold bust of Mr. Assad’s father, former President Hafez al-Assad. “It was like a poke in the eye.”

Photo

A performer suspended before a giant picture of President Bashar al-Assad at a pro-government rally in Damascus.Credit
Louai Beshara/Agence France-Presse — Getty Images

Good statistics remain a rarity here. But trade and investment activity is already off by 50 percent, financial analysts in Damascus said, and estimates on how much the economy will shrink this year range from 12 to 20 percent. The higher estimates kick in if sanctions — like a flight ban still being debated by the Arab League — are toughened.

Layoffs are rampant, with unemployment estimated to have risen to 22 percent. The tourism sector, which amassed about $6 billion in 2010, a boom year, has been decimated.

Hotel managers report occupancy rates of 15 percent or lower, if they will divulge them at all, and numerous restaurants have gone broke. Financial analysts said the luxury Four Seasons chain tried to close its once-booming Damascus hotel, an effort rejected by the government, which owns an estimated 50 percent share.

Sven Wiedenhaupt, the hotel’s general manager, refused to divulge his occupancy figures or how many staff members had been laid off. But he silently cast his head first left, then right to emphasize the absence of anyone in the cavernous, distinctly chilly lobby. “We are still keeping the lights on and trying to remain cutting edge,” Mr. Wiedenhaupt said.

At one hotel in the northern city of Aleppo, the appearance of two German tourists proved so startling that the entire staff, from the manager to the chambermaids, rushed to pose for pictures with them. “It was like they had arrived from another planet,” said a Syrian woman who witnessed the scene and, like others interviewed, requested anonymity for fear of reprisal.

Although sanctions blocked transactions in dollars, until this week Syrian businessmen could still work in euros, Saudi riyals or dirhams from the United Arab Emirates. Those windows are closing.

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One businessman with experience in the sanctions against Sudan said they had little effect because global vigilance proved lax. But scrutiny of Syrian transactions has been fast and widespread, he said.

In addition, the Assad government has been so focused on portraying the protests as an armed invasion by foreign jihadists that it has done little to anticipate the impact of the sanctions, analysts said. That was compounded by the firing in March of the cabinet ministers responsible for modernizing the economy.

Oil sales — accounting for a major share of the government’s revenues — plummeted as the main European customers stopped buying. Royal Dutch Shell announced Friday that it was stopping operations in Syria to comply with new European Union sanctions. Even if Syria found new markets, analysts noted, insuring shipments would be likely to prove impossible.

Citing government figures, Jihad Yazigi, the editor of The Syria Report, a business newsletter, said oil production was down to 270,000 barrels per day, from 368,000 barrels, because of the decline in demand. Syria imports light crude oil to help refine the heavy local oil, so it faces shortages of gasoline, kerosene and heating oil as sanctions curtail the imports.

Banking has also been battered. The fact that Syria licensed 14 private banks has been the crown jewel in President Assad’s economic modernization. But deposits in those banks shrank 20 percent in the past nine months, according to one private study, with about $2 billion withdrawn.

Construction has suffered as well, particularly large infrastructure projects. An engineer who frequently bids on government contracts said that no new projects were forthcoming and that some already started had been stopped.

The Damascus souks, or marketplaces, are among the few such places in the Middle East that still produce traditional handicrafts. Their wooden furniture inlaid with mother-of-pearl and brass lanterns are in high demand throughout the region.

Over sweet cups of apple tea, one manufacturer grumbled that even simple business transactions are becoming a headache. He worried that Syria would repeat the experience of Iraq, where the government under sanctions and black marketers thrived via illicit oil sales while impoverished university professors ended up driving cabs. “Bashar Assad is one person, but there are 23 million Syrians,” he said. “All this pressure they put on Syria just makes the regime stronger because it gives them power.”

As the pressure mounts and the killing continues, two schools of thought emerged here.

In one corner stood the so-called traditionalists, particularly older businessmen who have lived through various iterations of sanctions over the past 30 years, not to mention the haphazard socialist central planning. For them the new measures were unquestionably a blow.

But they argued that Syrians would adjust exactly as they did in the 1980s, when they endured rationing or drove to kiosks just over the Jordanian border to buy basics like toilet paper.

But many in the younger generation are not quite so sanguine. They point out that, in the past, Syria was far less connected to the international economy. One positive change brought by Mr. Assad since inheriting power in 2000 has been edging Syria’s economy onto at least the slow lane of the global information superhighway.

The new generation is bracing for Syria’s being abruptly forced off that highway, and for the economy’s sputtering.

If there is one bright spot in Syria’s markets, it has been the growth in food sales. Though they are up, they were most likely spurred by hoarding, which inflated prices by about 20 percent, experts said. Syria has warehoused strategic commodities like cotton, olive oil and a two-year supply of wheat. Officials said it was self-sufficient in most food.

“We have no fear that people will starve or freeze,” Foreign Minister Walid al-Moallem said in a news conference denouncing the sanctions. “They will affect the citizens without any doubt, but our people are used to such pressures.”

The entrepreneurial generation is not convinced. “Before, they could last years in a closed system where there was no connection to the outside world, but the whole dynamic has shifted,” said a financial analyst. “It is no longer an issue of hunkering down and eating the strategic reserve of wheat.”

Hwaida Saad contributed reporting.

A version of this article appears in print on December 3, 2011, on Page A1 of the New York edition with the headline: Sanctions Against Syria Are Keenly Felt, From Shops to Oil Fields. Order Reprints|Today's Paper|Subscribe